Answer:
United Resources Company
Stockholders section of the balance sheet at the end of the year:
Common Stock:
Authorized 206,000 shares at $3 par value
Issued 88,000 shares $264,000
Additional Paid-in Capital
($968,000 -364,000 + 136,000) 740,000
Treasury Stock ($78,000 - 24,000) (54,000)
Total Equity $950,000
Explanation:
a) The authorized common stock is stated in the balance sheet as a memorandum record. It does not form part of the calculation of equity since all the shares have not been issued.
b) Issued common stock is valued at 88,000 * $3 = $264,000
c) The difference in the par value and the issue price is recorded in the Additional Paid-in Capital Account. It is also where the increases and decreases in Treasury stock above or below par values are recorded.
d) Treasury Stock is a common stock contra account which records the repurchase and resale of common stock. Two methods are used. One recognizes the whole cost of treasury stock in the Treasury Stock account. It is called the costing method. The other method, called the par-value method, recognizes the above and below par value in the Additional Paid-in Capital.
